<PAGE>
EXHIBIT 99.5
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
Greenbelt Division
------------------------------------
)
)
In re )
)
)
CRIIMI MAE Inc., et al., ) Chapter 11
) Case Nos. 98-2-3115(DK)
) through 98-2-3117(DK)
Debtors. ) (Jointly Administered)
)
------------------------------------
PRAECIPE FILING AMENDED EXHIBIT B TO THE DEBTORS'
SECOND AMENDED JOINT DISCLOSURE STATEMENT
In connection with the hearing on approval of the Debtors'
Second Amended Joint Disclosure Statement (the "Disclosure Statement') held on
April 25, 2000, CRIIMI MAE Inc. ("CMI"), CRIIMI MAE Holdings II, L.P.
("Holdings") and CRIIMI MAE Management, Inc. ("Management") (collectively, the
"Debtors") and the Official Committee of Equity Security Holders of CMI (the
"Equity Committee"), by and through their undersigned counsel, hereby file this
Praecipe Filing Amended Exhibit B to the Debtors' Second Amended Joint
Disclosure Statement.
<PAGE>
Approval of the Disclosure Statement including Amended Exhibit
B filed herewith is hereby requested.
Dated: July 21, 2000
VENABLE, BAETJER AND AKIN, GUMP, STRAUSS,
HOWARD, LLP HAUER & FELD, L.L.P.
By: /s/ By: /s/
---------------------------------- -----------------------------------
Richard L. Wasserman Stanley J. Samorajczyk
Federal Bar No. 02784 Federal Bar No. 03113
Carrie B. Weinfeld 1333 New Hampshire Ave., NW
Federal Bar No. 25365 Washington, D.C. 20036
1800 Mercantile Bank and Trust Building (202) 887-4000
Two Hopkins Plaza
Baltimore, Maryland 21201 Co-Counsel for CRIIMI MAE Inc.
(410) 244-7400 and CRIIMI MAE Holdings II, L.P.,
Debtors-in-Possession
Co-Counsel for CRIIMI MAE Inc.
and CRIIMI MAE Holdings II, L.P.,
Debtors-in-Possession
SHULMAN, ROGERS, GANDAL, COVINGTON & BURLING
PORDY & ECKER, P.A.
By: /s/ By: /s/
--------------------------------- -----------------------------------
Morton A. Faller Michael St. Patrick Baxter
Federal Bar No. 01488 Federal Bar No. 09694
11921 Rockville Pike Dennis B. Auerbach
Third Floor Federal Bar No. 09290
Rockville, MD 20852-2753 1201 Pennsylvania Avenue, N.W.
(301) 231-0928 Washington, D.C. 20044
(202) 662-6000
Counsel for CRIIMI MAE
Management, Inc., Counsel for the Official Committee
Debtor-in-Possession of Equity Security Holders of
CRIIMI MAE Inc.
-2-
<PAGE>
AMENDED EXHIBIT B TO THE
DEBTORS' SECOND AMENDED JOINT DISCLOSURE STATEMENT
<PAGE>
EXHIBIT B
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
CRIIMI MAE INC.
Unaudited ProForma Condensed Consolidated Balance Sheet (Net of Match Funded
Debt or "MFD")
AMOUNTS IN MILLIONS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
MATCH FUNDING 12/31/1999 PROFORMA ADJ. 9/30/2000 EMERGENCE 9/30/2000
12/31/1999 RECLASS NET OF MFD 01/00 TO NET PROFORMA ADJUSTMENTS REORGANIZED
9/00 (1) (2)
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and Cash Equivalents 91.6 - 91.6 114.9 206.6 (183.0) 23.5
CMBS Assets 1,179.3 (278.2) 901.1 (355.2) 545.9 - 545.9
Insured Mtg Securities 394.9 (378.7) 16.1 (4.1) 12.0 - 12.0
Originated Loans 470.2 (399.8) 70.4 (70.4) - - -
Equity Basis Subsidiaries 34.9 - 34.9 (1.6) 33.3 - 33.3
Receivables and Other Assets 122.8 (7.6) 115.2 (57.2) 58.0 - 58.0
----------------------------------------------------------------------------------------------------
TOTAL ASSETS 2,293.7 (1,064.2) 1,229.4 (373.6) 855.8 (183.0) 672.8
----------------------------------------------------------------------------------------------------
LIABILITIES:
Accounts and Other Payables 92.0 (7.6) 84.4 (36.7) 47.7 (35.7) 12.0
CBO Debt-CMBS 278.2 (278.2) - - - - -
CMO Debt-Insured Mtg Securities 378.7 (378.7) - - - - -
CMO Debt-Originated Loans 399.8 (399.8) - - - - -
------ ------- ---- ---- ---- ---- -----
1,056.6 (1,056.6) - - - - -
Secured Financing 732.9 - 732.9 (363.4) 369.5 (369.5) -
Unsecured Notes 100.0 - 100.0 - 100.0 (100.0) -
Other Unsecured Debt 91.0 - 91.0 3.8 94.9 (94.9) -
Other Secured Debt 1.8 - 1.8 (1.8) - - -
---- ---- ---- ----- ---- ---- ----
925.7 - 925.7 (361.3) 564.4 (564.4) -
Merrill/GACC Debt (new) - - - - - 269.5 269.5
Note A (new) - - - - - 105.0 105.0
Note B (new) - - - - - 50.5 50.5
---- ---- ---- ---- ---- ----- -----
- - - - - 425.0 425.0
Total Liabilities 2,074.3 (1,064.2) 1,010.1 (398.0) 612.0 (175.0) 437.0
SHAREHOLDERS' EQUITY:
Preferred Equity Face Value 60.2 - 60.2 - 60.2 - 60.2
Dividend Preferred Equity Face Value 8.5 - 8.5 15.9 24.4 - 24.4
Common Equity 150.6 - 150.6 8.5 159.2 (8.0) 151.2
------ ---- ------ ---- ------ ----- ------
159.1 - 159.1 24.4 183.5 (8.0) 175.6
----------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY 2,293.7 (1,064.2) 1,229.4 (373.7) 855.8 (183.0) 672.8
----------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents activities from January 1, 2000 to September 30, 2000 exclusive
of cash payment and debt issuance to creditors pursuant to the Plan.
(2) Represents cash payments and debt issuance to creditors pursuant to the
Plan.
2
<PAGE>
The unaudited pro forma condensed consolidated balance sheet (the "Pro
Forma Balance Sheet") presented on the preceding page is based upon the
historical balance sheet of the Company as of December 31, 1999. The Pro Forma
Balance Sheet gives effect to (i) the reclassification of non-recourse debt and
related interest payable against the corresponding CMBS, Insured Mortgage, and
Originated Loan assets as reported on the Company's GAAP basis consolidated
balance sheet as of December 31, 1999 (the "Match Funding Reclassification"),
(ii) pro forma adjustments to reflect the anticipated results of operations from
December 31, 1999 through September 30, 2000 (the "Assumed Effective Date"), and
(iii) the reorganization, as detailed in the Plan, assuming the Plan becomes
effective on the Assumed Effective Date (collectively, the "Pro Forma
Adjustments"). Although the Company's financial results are not normally
presented reflecting the Match Funding Reclassification, the Company believes
that this presentation more clearly depicts the economic impact of the
transactions contemplated by the Plan.
The Company does not qualify for "fresh start reporting" under the
provisions of the American Institute of Certified Public Accountants' Statement
of Position ("SOP") 90-7 "Financial Reporting by Entities in Reorganization
under the Bankruptcy Code" because (i) the Company's reorganization value of
assets immediately before the date of Confirmation is expected to exceed the
total of all post-petition liabilities and allowed Claims, and (ii) the Holders
of existing voting shares immediately before Confirmation will receive more than
50 percent of the voting shares of the emerging entity.
THE PRO FORMA BALANCE SHEET IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY
AND SHOULD NOT BE CONSTRUED TO BE AN ACTUAL STATEMENT OF THE FINANCIAL
CONDITION, OR REFLECT OPERATING RESULTS, OF THE COMPANY ASSUMING THE
TRANSACTIONS DESCRIBED HEREIN ARE CONSUMMATED ON THE RESPECTIVE DATES INDICATED,
AND IS NOT INTENDED TO BE PREDICTIVE OR REPRESENTATIVE OF THE FINANCIAL
CONDITION OR RESULTS OF OPERATIONS OF THE COMPANY AT ANY FUTURE DATE OR FOR ANY
FUTURE PERIOD.
The Pro Forma Adjustments are based on available information and upon
certain assumptions that the Company believes are reasonable under the
circumstances. The Pro Forma Balance Sheet and accompanying notes should be read
in conjunction with the historical consolidated financial statements of the
Company, including the notes thereto, and the other information pertaining to
the Company appearing elsewhere in this Disclosure Statement. In addition, the
independent public accountants of the Company, Arthur Andersen LLP, have neither
examined nor compiled or provided any other assurance report on the Pro Forma
Balance Sheet in accordance with Generally Accepted Auditing Standards, and
accordingly, assume no responsibility for it.
2
<PAGE>
PROJECTED FINANCIAL INFORMATION
CRIIMI MAE INC.
Projected Condensed Consolidated Basis Balance Sheet-Net of Match Funded Debt
("MFD")
AMOUNTS IN MILLIONS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
EFFECTIVE DATE 1 2 3 4 5 6 7 8
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents 23.5 23.5 16.7 8.9 5.0 3.7 20.1 30.3 41.4
CMBS Assets Net of MFD 545.9 549.0 552.5 558.5 566.9 578.1 591.3 606.9 623.5
Insured Mortgage Securities, Net of MFD 12.0 11.3 10.8 10.3 10.0 9.7 9.5 9.3 9.2
Equity Basis Subsidiaries 33.3 32.8 32.9 32.6 31.8 30.6 29.0 27.0 24.7
Receivables and Other Assets 58.0 52.8 48.5 44.3 42.0 44.5 40.0 38.1 36.9
-------------------------------------------------------------------------------------------
TOTAL ASSETS 672.8 669.5 661.5 654.6 655.7 666.5 689.9 711.6 735.8
-------------------------------------------------------------------------------------------
Accounts and Other Payables 12.0 16.3 17.3 15.2 14.8 11.3 12.0 12.0 12.0
Merrill/GACC Debt 269.5 244.5 219.4 206.1 - - - - -
Note A 105.0 97.3 85.6 64.6 47.5 - - - -
Note B 50.5 54.2 58.1 62.3 66.8 71.7 - - -
Merrill/GACC Replacement Debt - - - - 193.5 176.6 158.0 137.5 115.0
Note A Replacement Debt - - - - - 43.9 43.9 43.9 43.9
Note B Replacement Debt - - - - - - 79.1 79.1 79.1
------ ------ ------ ------ ------ ------ ------- ------- -------
425.0 396.0 363.1 333.0 307.8 292.2 281.0 260.6 238.1
Preferred Equity Face Value 60.2 44.9 39.9 39.9 39.9 39.9 39.9 39.9 39.9
Dividend Preferred Equity Face Value 24.4 24.4 24.4 24.4 24.4 24.4 24.4 24.4 24.4
Common Equity 151.2 187.9 216.9 242.2 268.8 298.8 332.6 374.9 421.5
------ ------ ------ ------ ------ ------ ------ ------ -----
175.6 212.3 241.3 266.6 293.2 323.2 357.0 399.2 445.9
-------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 672.8 669.5 661.5 654.6 655.7 666.5 689.9 711.6 735.8
-------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
CRIIMI MAE INC.
Projected Cashflows - Net of Match Funded Debt ("MFD")
AMOUNTS IN MILLIONS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
1 2 3 4 5 6 7 8
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASHFLOWS
CBO 1 Retained Bonds 11.0 10.9 10.9 11.0 10.8 11.3 11.4 11.2
CBO 2 Retained Bonds 72.0 72.1 72.2 72.0 71.9 71.7 71.3 72.1
Nomura 1998 D-6 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8
Effect of Credit Losses and Int.
Shortfalls on Cashflow (4.9) (5.6) (8.4) (10.6) (12.4) (13.8) (14.6) (14.8)
----- ----- ----- ------ ------ ------ ------ ------
$ 80.9 $ 80.1 $ 77.5 $ 75.2 $ 73.1 $ 72.0 $ 70.8 $ 71.3
Insured Mortgage Securities - Net of MFD 3.5 3.2 3.0 2.8 2.6 2.4 2.3 2.1
AIM Funds Gen. Ptnrship and Investment
LP Interests 3.1 2.5 1.9 1.5 1.2 1.0 0.8 0.6
Mezzanine Loans 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1
Short-Term Interest Income 1.6 1.4 0.9 0.5 0.3 0.8 1.7 2.4
Servicing Affiliates distributions - - - - - - - -
---- ---- ---- ---- ---- ---- ---- ----
90.2 88.3 84.4 81.0 78.3 77.2 76.6 77.5
INTEREST EXPENSE
Merrill/GACC Debt (25.8) (23.3) (21.4) (20.1) - - - -
Note A (11.9) (10.7) (8.8) (6.6) (5.4) - - -
Note B (6.8) (7.3) (7.8) (8.4) (14.0) (4.8) - -
Merrill/GACC Extension Fees - (3.3) (6.4) (2.9) - - - -
Note A Extension Fees - - - (0.7) (1.3) - - -
Note B Extension Fees - - - (1.0) (3.3) - - -
Merrill/GACC Replacement Debt - - - - (19.4) (17.7) (15.9) (13.8)
Note A Replacement Debt - - - - - (5.2) (5.2) (5.2)
Note B Replacement Debt - - - - - - (10.3) (10.3)
LIBOR Cap Hedge Cashflows 0.4 0.0 - - - - - -
---- ---- ---- ---- ---- ---- ---- ------
(44.1) (44.6) (44.4) (39.7) (43.5) (27.7) (31.3) (29.3)
---------------------------------------------------------------------------------------
NET INTEREST MARGIN 46.1 43.6 40.0 41.4 34.8 49.5 45.3 48.2
---------------------------------------------------------------------------------------
General Operating & Administrative (10.0) (10.0) (10.0) (10.2) (10.8) (11.0) (11.2) (11.2)
---------------------------------------------------------------------------------------
CASHFLOW FROM OPERATIONS 36.1 33.6 30.0 31.2 23.9 38.5 34.1 37.0
---------------------------------------------------------------------------------------
DEBT AMORTIZATION
Merrill/GACC Debt (25.0) (25.1) (13.3) (14.6) - - - -
Note A Miscellaneous Collateral Amortization (7.7) (6.8) (6.0) (5.4) (4.9) - - -
Note A Other Scheduled Amortization - (5.0) (15.0) (11.6) - - - -
Merrill/GACC Replacement Debt
- - - - (16.9) (18.6) (20.4) (22.5)
---- ---- ---- ---- ------ ------ ------ ------
(32.6) (36.9) (34.3) (31.6) (21.8) (18.6) (20.4) (22.5)
DEBT FACILITY MATURITIES/REFINANCING
Principal Amount of Replacement Financing - - - 193.5 43.9 79.1 - -
Replacement Financing Origination Fees - - - (1.9) (1.3) (2.2) - -
Emergence Debt Principal Repayments - - - (191.5) (42.6) (77.0) - -
---- ---- ---- ------- ------ ------ ---- ----
Net Proceeds - - - - - - - -
---------------------------------------------------------------------------------------
Cashflow Available to Equity 3.5 (3.3) (4.3) (0.5) 2.2 19.9 13.7 14.5
---------------------------------------------------------------------------------------
DIVIDENDS
Dividend Preferred Cash Dividends (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5)
---------------------------------------------------------------------------------------
NET INCR/DECR IN CASH - (6.8) (7.8) (3.9) (1.3) 16.4 10.2 11.0
---------------------------------------------------------------------------------------
CASH RECONCILIATION
Opening Balance 23.5 23.5 16.7 8.9 5.0 3.7 20.1 30.3
Net Increase/Decrease - (6.8) (7.8) (3.9) (1.3) 16.4 10.2 11.0
---------------------------------------------------------------------------------------
ENDING CASH BALANCE 23.5 16.7 8.9 5.0 3.7 20.1 30.3 41.4
---------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
CRIIMI MAE INC.
Projected Tax Basis (Loss) Income - Net of Match Funded Debt ("MFD")
AMOUNTS IN MILLIONS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
1 2 3 4 5 6 7 8
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TAX BASIS INCOME
CBO1, CBO2, and Nomura NR 112.0 115.4 120.2 123.7 127.5 131.3 131.2 128.3
Effect of Credit Losses and Int.
Shortfalls on Tax Income (2.6) (5.8) (9.2) (12.0) (14.5) (16.4) (17.7) (18.2)
-------- -------- -------- -------- -------- -------- -------- --------
$ 109.5 $ 109.6 $ 111.0 $ 111.7 $ 113.0 $ 114.9 $ 113.4 $ 110.1
Insured Mortgage Securities - Net of MFD 2.8 2.6 2.4 2.3 2.1 2.0 1.9 1.8
AIM Funds Gen. Ptnrship and Investment
LP Interests 1.0 0.8 0.6 0.5 0.4 0.3 0.2 0.2
Mezzanine Loans and Short Term Interest 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1
Short-Term Interest Income 1.6 1.4 0.9 0.5 0.3 0.8 1.7 2.4
Servicing Affiliates - Equity Income 1.6 1.7 0.9 0.2 (0.4) (0.9) (1.4) (1.9)
-------- -------- -------- -------- -------- -------- -------- --------
117.6 117.2 117.0 116.3 116.5 118.1 116.9 113.7
INTEREST EXPENSE
Merrill/GACC Debt (25.8) (23.3) (21.4) (20.1) - - - -
Note A (11.9) (10.7) (8.8) (6.6) (5.4) - - -
Note B (10.5) (11.2) (12.0) (12.9) (13.8) (15.1) - -
Merrill/GACC Extension Fees - (3.3) (6.4) (2.9) - - - -
Notes A&B Extension Fees - - - (1.7) (4.7) - - -
Merrill/GACC Replacement Debt - - - - (19.4) (17.7) (15.9) (13.8)
Note A Replacement Debt - - - - - (5.2) (5.2) (5.2)
Note B Replacement Debt - - - - - - (10.3) (10.3)
Gain on LIBOR Cap Hedges 0.4 0.0 - - - - - -
Amort of Deferred Costs (2.4) (1.4) (1.3) (1.3) (1.6) (1.6) (1.9) (1.2)
-------- -------- -------- -------- -------- -------- -------- --------
(50.1) (50.0) (50.0) (45.5) (44.9) (39.6) (33.2) (30.4)
---------------------------------------------------------------------------------------
NET INTEREST MARGIN 67.5 67.2 67.0 70.8 71.5 78.5 83.6 83.3
---------------------------------------------------------------------------------------
General Operating & Administrative (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0)
Credit Loss Deduction - Estimated (2.4) (8.0) (12.9) (13.7) (11.4) (10.0) (7.8) (5.3)
Amortization of Mark to Market Adjustment (119.5) (119.5) (119.5) (29.9) - - - -
Deductions for Dividends Paid - - - (7.8) (7.8) (7.8) (7.8) (7.8)
NOL Carryforward Utilization - - - (8.5) (38.1) (45.7) (52.3) (54.2)
---------------------------------------------------------------------------------------
TAXABLE (LOSS) INCOME (1) (64.4) (70.2) (75.4) 0.9 4.2 5.1 5.8 6.0
---------------------------------------------------------------------------------------
DIVIDENDS
Series B (4.3) (4.3) (4.3) (4.3) (4.3) (4.3) (4.3) (4.3)
Series E (1.5) (0.2) - - - - - -
Series F and Series G Dividend Preferred (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5)
---------------------------------------------------------------------------------------
Subtotal (9.3) (8.0) (7.8) (7.8) (7.8) (7.8) (7.8) (7.8)
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
CASH DIVIDENDS TO COMMON - - - - - - - -
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
NET OPERATING LOSS
NOL Created (64.4) (70.2) (75.4) - - - - -
Taxable Income before NOL Usage - - - 9.4 42.3 50.7 58.1 60.2
Alternative Minimum Tax Limitation - - - (0.9) (4.2) (5.1) (5.8) (6.0)
-------- -------- -------- -------- -------- -------- -------- --------
NOL Utilized - - - 8.5 38.1 45.7 52.3 54.2
-------- -------- -------- -------- -------- -------- -------- --------
NOL Carryforward Amount (2) (133.1) (203.4) (278.8) (269.3) (227.0) (176.3) (118.2) (58.0)
---------------------------------------------------------------------------------------
</TABLE>
(1) - The Company, due to Alternative Minimum Tax NOL usage limitations,
accrues and pays tax at 20% of the AMT Taxable Income beginning in
Period 4 of this Projection Statement.
(2) - Beginning in Period 4, this amount represents the AMT NOL carryforward.
5
<PAGE>
The preceding projected financial data (the "Projections") were
prepared by CRIIMI MAE based upon various assumptions including assumptions
about the economy and financial markets in general, and the related effect on
the Reorganized Company's future financial condition and results of operations.
The Projections are provided for informational purposes only. The
Company does not generally publish its business plans and strategies or make
external projections of its anticipated financial position or results of
operations. Accordingly, the Company does not intend to update or otherwise
revise the Projections to reflect circumstances existing since their preparation
in July 2000, or to reflect the occurrence of unanticipated events, even in the
event that any or all of the underlying assumptions are shown to be in error.
Furthermore, the Company does not intend to update or revise the Projections to
reflect changes in general economic or industry conditions. However, the
Company's regular quarterly and annual financial statements, and the
accompanying discussion and analysis, contained in the Company's Quarterly SEC
Reports on Form 10-Q and Annual Reports on Form 10-K, will contain disclosure
concerning the Company's actual financial condition and operating results during
the period covered by such Reports.
The Projections were prepared for the limited purpose of providing
information in conjunction with the Plan. Accordingly, the Projections were not
prepared to comply with guidelines for prospective financial statements
published by the American Institute of Certified Public Accountants regarding
financial projections, and are not intended to comply with Rule 11-02 of
Regulation S-X of the SEC. The Company believes that while not consistent with
its traditional GAAP and SEC reporting, the Projections present the net assets
and recourse debt obligations in a more relevant and understandable format for
the purpose of this Disclosure Statement. The Company's independent public
accountants, Arthur Andersen LLP, have neither compiled nor examined, or
provided any other assurance report in accordance with Generally Accepted
Auditing Standards, on the accompanying projected financial information, to
determine the reasonableness thereof and, accordingly, have not expressed any
opinion or any other form of assurance with respect thereto.
Projected unaudited consolidated financial statements for the Company
are included for eight annual periods commencing on the Assumed Effective Date.
Additional information relating to the principal assumptions used in
preparing the Projections is set forth below. See "CERTAIN RISK FACTORS" for a
discussion of various other factors that could materially affect the Company's
financial condition, results of operations, businesses, prospects and
securities.
The following points represent the significant assumptions underlying
the Pro Forma Balance Sheet and Projections.
6
<PAGE>
SIGNIFICANT ASSUMPTIONS RELATED TO THE PRO FORMA BALANCE SHEET AND PROJECTIONS
PRE-EMERGENCE ASSET SALE TRANSACTIONS:
The Projections assume that the CMBS Sale Portfolio is sold as follows:
- Morgan Wells and Lehman/First Union Bonds were sold in February and April
2000, respectively.
- Balance of the CMBS Sale Portfolio is sold on or before September 30, 2000.
- The combined sales price of the CMBS Sale Portfolio, inclusive of the
Company's economic interest in the Originated Loans (CMO-IV), is
approximately $433 million, $351 million of which is used to pay related
secured debt.
General:
- THE DEBTORS' PLAN IS EFFECTIVE ON SEPTEMBER 30, 2000 (THE "ASSUMED
EFFECTIVE DATE").
- THE PRO FORMA BALANCE SHEET AND THE PROJECTIONS ARE PRESENTED NET OF THE
NON-RECOURSE DEBT ASSOCIATED WITH THE COMPANY'S ASSETS. THE NON-RECOURSE
DEBT WAS ISSUED IN RELATION TO THE COMPANY'S 1996 AND 1998 CMBS
RE-SECURITIZATION TRANSACTIONS (CBO-1 AND CBO-2), THE INSURED MORTGAGE
SECURITIES (CMO-I, CMO-II, CMO-III) AND THE ORIGINATED LOANS (CMO-IV),
COLLECTIVELY ("THE MATCH FUNDED DEBT"). IT IS ANTICIPATED THAT THE MATCH
FUNDED DEBT AND CORRESPONDING ASSETS RELATED TO THE CMO-IV TRANSACTION WILL
BE REMOVED FROM THE COMPANY'S BALANCE SHEET WHEN SUCH ECONOMIC INTERESTS
ARE SOLD.
- THE PRO FORMA BALANCE SHEET ANTICIPATES THE RECOGNITION OF NEW DEBT AT FAIR
VALUE, WITH THE RELATED ORIGINATION AND PROFESSIONAL FEES RECOGNIZED AS
CURRENT EXPENSE ITEMS AS OPPOSED TO CAPITALIZED ITEMS IN ACCORDANCE WITH
SOP 90-7. THE COMPANY DOES NOT CURRENTLY ANTICIPATE A DIFFERENCE BETWEEN
THE NEW DEBT'S FAIR VALUE AND ITS PREVIOUS CARRYING AMOUNT, ALTHOUGH THERE
CAN BE NO ASSURANCE THAT SUCH A DIFFERENCE WILL NOT OCCUR. ANY DIFFERENCE
BETWEEN THE NEW DEBT'S FAIR VALUE AND ITS PREVIOUS CARRYING AMOUNT WILL BE
RECOGNIZED AS AN EXTRAORDINARY ITEM.
- For all Projection periods, the Company assumes that one month LIBOR
remains constant at 6.8%. This LIBOR benchmark is utilized to calculate the
interest cost on the Merrill/GACC Debt facility, its successor facility,
and as a proxy for the Series E Preferred Stock floating rate dividend
accrual benchmark, and to estimate the Company's reinvestment income.
THE COMPANY'S BUSINESS PLAN:
The Projections are a base line measure and assume that no additional purchases
of CMBS are made during the Projection period. It is not the Company's intention
to accumulate net excess cash generated from its existing assets; rather, the
base line Projections are intended to demonstrate the amount of excess cash that
the core group of assets would, based upon assumptions, generate under the
Company's reorganized debt structure. Any excess cash generated by the core
group of assets, exclusive of that used to service the Company's debt, pay
operating expenses, or make required cash dividend payments, is assumed to be
retained in cash or short-term investments and reinvested at one month LIBOR.
Although the Company contemplates that such cash would, in part, fund its
securities trading, acquisition, and other investment activities, it has not
projected the results of any such activities. The Company expects to continue to
operate its business in such a manner that it will not be required to register
as an investment company under the Investment Company Act of 1940 and the rules
and regulations thereunder.
7
<PAGE>
FINANCIAL STATEMENT PRESENTATION
GENERAL:
- The Projections have not been prepared or presented in a manner consistent
with the Company's traditional GAAP reporting, although the Company
believes that the method of presentation (reflecting the Match Funding
Reclassification) is more relevant and understandable in presenting the
economics of the transactions contemplated by the Plan.
- The periods presented are annual periods beginning with the Assumed
Effective Date. The years presented do not represent calendar years.
BALANCE SHEETS:
- The Company's assets, as presented in the Pro Forma Balance Sheet at
December 31, 1999, equal the reported fair value, or amortized cost as
appropriate, less the amortized cost of the related Match Funded Debt,
arriving at a Net of Match Funded Debt presentation. The resulting asset
presentation is subsequently adjusted for discount and/or premium
amortization to reflect the passage of time in the Projection periods. The
projected balance sheet treatment of the CMBS and Insured Mortgage
Securities, while reflective of the normal estimated discount and/or
premium amortization related to the assets, is not intended to represent
the fair value of the Company's retained portion of such assets for any
given Projection period.
- Liabilities presented on the Pro Forma and projected balance sheets are
only those liabilities that are recourse to the Company.
PROJECTED CASHFLOWS:
- The Projected Cashflows are presented reflecting the Match Funding
Reclassification.
- For purposes of the Projections, it is assumed that the Company neither
receives, nor funds, any cash to or from its primary servicing affiliate,
CRIIMI MAE Services Limited Partnership ("CMSLP").
PROJECTED TAX BASIS (LOSS)/INCOME:
- Tax Basis (Loss)/Income presentation is presented reflecting the Match
Funding Reclassification.
- For purposes of the Projections, the effect of "writing down" the CMBS
portfolio, resulting from the Company's trader status election as discussed
below, is in effect throughout the Projection period.
IMPACT OF TRADER ELECTION:
- The Company has elected to be classified as a securities trader for tax
purposes.
- Such election impacts the Projections primarily through:
- Recognition of approximately $478 million of mark-to-market
adjustments to the tax basis of the CMBS securing the Company's CBO
assets on a straight line basis over years one through four of the
Projections;
- Corresponding downward adjustment of the tax basis of the Company's
retained CMBS assets;
- Subsequent to the $478 million mark-to-market adjustment, a relative
increase in the tax yield and taxable income of the Company's CMBS due
to such decrease in tax basis;
- Creation of tax basis net operating losses for the first four years of
the Projections, primarily resulting from the recognition of the
aforementioned mark-to-market adjustments. Any accumulated and unused
net operating loss carryforward is utilized to offset the majority of
taxable income in periods five through eight of the Projections.
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ASSETS:
CMBS ASSETS (AND RELATED CREDIT LOSSES):
- The Projections assume that the Company's CMBS assets, after giving effect
to the sale of the CMBS Sale Portfolio, include the retained bonds from its
CBO-1 and CBO-2 resecuritizations, and the unrated bond from the NASC 1998
D-6 securitization. Economically, the Company holds approximately $111
million, $1.1 billion, and $47 million face amount of bonds from CBO-1,
CBO-2 and NASC 1998 D-6, respectively. Collectively, the Company's CMBS
have a weighted average coupon of approximately 6.8%.
- The Projections utilize the Company's most recent estimates of future
credit losses on the CMBS assets described above.
- The tax basis credit loss deductions are assumed to be realized through a
proportionate reduction in the then current tax basis of the bonds when
compared to the assumed face amount of the loss.
- The magnitude and timing of credit losses have a direct impact on the
Company's cashflow. The Company projects interest shortfalls during the
periods covered by the Projections that are equal to approximately one
year's coupon interest income on the succeeding year's assumed CMBS
principal loss. The Company assumes that such interest shortfalls on
delinquent loan payments are not recovered.
INSURED MORTGAGE SECURITIES:
- Prepay at a constant prepayment rate ("CPR") of 10% during the period
covered by the Projections.
- The assets are presented reflecting the Match Funding Reclassification on
the balance sheet.
- The face amount of the mortgage securities is assumed to be $393 million
with corresponding aggregate CMO bond balances of $379 million.
- The weighted average coupon on the collateral is assumed at 7.7% and the
weighted average coupon on the related bonds is assumed at 7.0%.
EQUITY BASIS SUBSIDIARIES:
- The Company, through CRIIMI Inc., owns general partnership interests in AIM
84, AIM 85, AIM 86, and AIM 88. Such interests represent 2.9%, 3.9%, 4.9%
and 4.9% of the AIM fund net cashflow respectively. In addition, through
CRI/AIM Investment LP, the Company owns a 20% interest in the advisor to
the AIM funds. The advisor earns a fee based on AIM fund invested asset
balances. The Projections include cashflows related to the Company's
ownership interests, assuming a 21% CPR on the mortgages and invested
assets underlying the AIM funds.
- The Company carries its investment in servicing affiliates, CRIIMI MAE
Services L.P. and CRIIMI MAE Services Inc., utilizing the equity method of
accounting. For purposes of the Projections, it is assumed that the Company
neither receives, nor funds, any cash to or from these servicing
affiliates.
RECEIVABLES AND OTHER ASSETS:
- Pro forma Receivables and Other Assets include the following approximate
amounts:
- $14 million of intangible costs related to the merger of certain
business in 1995, and $14 million of debt issuance and other deferred
costs,
- $7 million of Mezzanine Notes that generate cashflow of approximately
15% per annum during the periods covered by the Projections,
- $12 million of miscellaneous assets, including a $3 million Deferred
Compensation Note Receivable, and
- $11 million of normalized interest receivable on assets.
Intangible assets are amortized in the Projections, while Mezzanine Loans
and Interest Receivable are assumed to remain constant throughout the
Projection period.
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LIABILITIES:
ACCOUNTS AND OTHER PAYABLES:
- Pro forma Accounts and Other Payables include the following approximate
amounts:
- $5 million of normalized accounts payable,
- $4 million of normalized interest payable on recourse debt,
- $3 million of CRIIMI MAE Management, Inc. note payable (offset through
other assets),
- Accounts and Other Payables are assumed to remain constant throughout
the Projection period with the exception of increases/decreases
reflecting the accrual and payment of extension fees to Merrill/GACC
and Notes A and B as discussed below.
Debt Facilities
MERRILL LYNCH/GACC DEBT: (SEE PLAN SECTION IV)
- Accrues and pays an interest rate of one month LIBOR plus 325bps per annum.
- Interest accrues on the average balance outstanding as of the beginning and
end of each period presented.
- Principal repayments are made in the following manner:
- Year 1 - All net cash flow available to the Company, after maintenance
of working capital, and the payment of:
- all interest due on debt,
- general and administrative expenses,
- Note A Miscellaneous Collateral amortization.
- Collectively these items are known as (the "Cash Sweep").
- Year 2 - Merrill/GACC Cash Sweep continues until the aggregate
principal paydown is equal to $50 million, assumed to occur within 24
months of the Assumed Effective Date.
- Years 3 and 4 - Merrill/GACC facility receives principal amortization
assuming the original principal amount is fully amortized, utilizing
mortgage-type amortization, by the 13th anniversary of the Assumed
Effective Date, with the interest rate remaining constant at one month
LIBOR plus 325bps.
- Extension fees are paid in cash to Merrill/GACC, at a rate of 1.5% of
the then outstanding principal balance, at the end of months 24, 30,
36 and 42.
NOTE A: (SEE PLAN SECTION IV)
- 5 year term and an interest rate of 11.75% per annum.
- Interest accrues on the average balance outstanding as of the beginning and
end of each period presented.
- Principal amortization (payable quarterly) beginning in year 1 and
throughout the five year term in an amount equal to the sum of the
following:
- Insured Mortgage Proceeds,
- AIM Fund Proceeds, and
- Mezzanine Note Proceeds.
- Collectively, these items are known as the "Miscellaneous Collateral
Amortization".
- Scheduled amortization payments of $0, $5 million, $15 million, and $15
million payable at the end of years 1, 2, 3 and 4, respectively. No
scheduled amortization is payable in year 5, as the remaining unpaid
principal amount of the note is due at the end of such year. If the Note A
holders do not receive all or any portion of a Scheduled Principal Paydown
in any year and the Miscellaneous Collateral has not been sold, the Note A
holders shall receive additional interest of 200 basis points on any unpaid
amortization amount until such time as the amount is paid. The Projections
make such adjustments where appropriate.
- Extension fees are paid in cash, at a rate of 1.5% of the then outstanding
principal balance, at the end of months 48 and 54.
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NOTE B (SEE PLAN SECTION IV)
- 6 year term, a cash interest rate of 13.00%, plus an accretion or negative
amortization rate of 7.00% of the outstanding principal balance.
- Interest is paid semi-annually in arrears through the fifth anniversary of
the Note with interest for the sixth year of the Note payable one-half on
the fifth anniversary of the Note and one-half on maturity date. Both the
cash and non-cash components accrue on the average balance outstanding as
of the beginning and end of each period presented.
- No cash principal amortization during its term.
- Total outstanding principal amount, including all accretion, is paid at the
end of year 6.
- Extension fees are paid in cash, at a rate of 1.5% of the then outstanding
principal balance, at the end of months 48, 54, and 60.
Refinancing of Debt Facilities
MERRILL/GACC REPLACEMENT DEBT:
- At the end of the 4 year period, it is assumed that the outstanding
principal balance of the Merrill/GACC facility is refinanced into a
hypothetical 8 year, fully amortizing facility. The terms of the
Merrill/GACC facility do not provide for any extension beyond the original
4 year period.
- Interest accrues and is payable at the same rate, one month LIBOR plus
325bps.
- An origination fee of 1.0% of the principal balance.
NOTE A REPLACEMENT DEBT:
- At stated maturity, 5 years after the Assumed Effective Date, it is assumed
that the outstanding principal balance is refinanced into a hypothetical
high-yield note. The terms of Note A do not provide for any extension
beyond the original 5 year term.
- Interest accrues and is payable at a rate of 11.75% per annum.
- No principal amortization.
- An origination fee of 3.0% of the principal balance.
NOTE B REPLACEMENT DEBT:
- At stated maturity, 6 years after the Assumed Effective Date, it is assumed
that the outstanding principal balance is refinanced into a hypothetical
high-yield note. The terms of Note B do not provide for any extension
beyond the original 6 year term.
- Interest accrues and is payable at a rate of 13.00% per annum.
- No principal amortization.
- No accretion coupon or negative amortization provisions.
- An origination fee of 3.0% of the principal balance.
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Preferred Stock
SERIES B PREFERRED STOCK:
- The entire amount, approximately $39 million face value, of Series B
Preferred Stock remains outstanding throughout the Projection period.
- The Company is seeking approval, through the Plan, to pay dividends on the
Series B Preferred Stock, including those accrued as of the Effective Date
(approximately $8.7 million), in cash or common stock at the Company's
option. It is assumed in the Projections that such dividends are paid in
common stock.
- Dividends accrue at 10.875% per annum prospectively, and are assumed paid
in CRIIMI MAE common stock.
SERIES D PREFERRED STOCK:
- All outstanding shares of Series D Preferred Stock, $10.0 million, are
exchanged for Series E Preferred Stock on a share-for-share basis before
the Assumed Effective Date.
- All accrued but unpaid dividends on the Series D Preferred Stock
(approximately $1.3 million) are paid in CRIIMI MAE common stock on the
Assumed Effective Date.
SERIES E PREFERRED STOCK:
- All accrued but unpaid dividends on the portion of the Series E Preferred
Stock which includes the previously exchanged Series C Preferred Stock
(approximately $1.7 million) are paid in CRIIMI MAE common stock on the
Assumed Effective Date.
- All shares of Series E Preferred Stock, $20.3 million after giving effect
to the exchange of Series D Preferred Stock, are converted into CRIIMI MAE
common stock within 15 months of the Assumed Effective Date.
- The Series E Preferred Stock accrues dividends at a rate of three month
LIBOR plus 250bps per annum after the Assumed Effective Date, and such
accrued dividends are paid in CRIIMI MAE common stock.
SERIES F DIVIDEND PREFERRED STOCK:
- The Company is seeking approval, through the Plan, to pay dividends on the
Series F Dividend Preferred Stock in cash or common stock at the Company's
option.
- The $5.9 million of currently outstanding Series F Dividend Preferred Stock
accrues dividends at a rate of 12% per annum, and the Projections assume
that such dividends are paid in cash.
SERIES G DIVIDEND PREFERRED STOCK:
- It is assumed that approximately $37 million of Series G Dividend Preferred
Stock is issued in 2000 in relation to 1999 taxable income.
- Dividends on the Series G Dividend Preferred Stock will be payable in cash
or common stock at the Company's option.
- 50% of the Series G Dividend Preferred Stock is assumed converted into
CRIIMI MAE common stock, and the outstanding balance is assumed to pay
dividends at a rate of 15% per annum. The Projections assume that such
dividends are paid in cash.
Common Stock:
- THE SECURITIES TRADER ELECTION AND REQUIRED RECOGNITION OF MARK-TO MARKET
ADJUSTMENTS CREATE TAX BASIS NET OPERATING LOSSES AND CARRYFORWARDS
THROUGHOUT THE PROJECTION PERIOD. BECAUSE THE COMPANY'S COMMON DIVIDENDS
ARE BASED ON TAXABLE INCOME AND RELATED REIT DISTRIBUTION REQUIREMENTS, NO
DIVIDENDS ARE ASSUMED PAID TO HOLDERS OF THE COMPANY'S COMMON STOCK DURING
THE PROJECTION PERIOD.
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GENERAL OPERATING AND ADMINISTRATIVE EXPENSES:
- General operating and administrative expenses represent the normalized
personnel, facility and operating costs the Company anticipates
experiencing. Such amounts approximate $10 million per year.
- General operating and administrative expenses increase beginning in year 4
due to assumed taxes relating to Alternative Minimum Tax usage limitations.
The Projections assume a non-deductible 20% tax on AMT Taxable Income.
- The general operating and administrative costs of operating CMSLP are
included net of revenues in the "Servicing Affiliates" caption in the
Estimated Tax Basis (Loss) Income Projection.
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 21ST day of July, 2000, copies
of the Praecipe Filing Amended Exhibit B to the Debtors' Second Amended Joint
Disclosure Statement were sent via first-class mail, postage prepaid (except as
otherwise indicated), to the persons on the attached service list.
/s/
--------------------------------
Richard L. Wasserman
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